Despite advancements in surgical technique and component design, implant loosening, stiffness, and instability remain leading causes of total knee arthroplasty (TKA) failure. Patient-specific instruments (PSI) aid in surgical precision and in implant positioning and ultimately reduce readmissions and revisions in TKA. The objective of the study was to evaluate total hospital cost and readmission rate at 30, 60, 90, and 365 days in PSI-guided TKA patients. We retrospectively reviewed patients who underwent a primary TKA for osteoarthritis from the Premier Perspective Database between 2014 and 2017 Q2. TKA with PSI patients were identified using appropriate keywords from billing records and compared against patients without PSI. Patients were excluded if they were < 21 years of age; outpatient hospital discharges; evidence of revision TKA; bilateral TKA in same discharge or different discharges. 1:1 propensity score matching was used to control patients, hospital, and clinical characteristics. Generalized Estimating Equation model with appropriate distribution and link function were used to estimate hospital related cost while logistic regression models were used to estimate 30, 60, and 90 days and 1-year readmission rate. The study matched 3,358 TKAs with PSI with TKA without PSI patients. Mean total hospital costs were statistically significantly (p < 0.0001) lower for TKA with PSI ($14,910; 95% confidence interval [CI]: $14,735-$15,087) than TKA without PSI patients ($16,018; 95% CI: $15,826-$16,212). TKA with PSI patients were 31% (odds ratio [OR]: 0.69; 95% CI: 0.51-0.95; p-value = 0.0218) less likely to be readmitted at 30 days; 35% (OR: 0.65; 95% CI: 0.50-0.86; p-value = 0.0022) less likely to be readmitted at 60 days; 32% (OR: 0.68; 95% CI: 0.53-0.88; p-value = 0.0031) less likely to be readmitted at 90 days; 28% (OR: 0.72; 95% CI: 0.60-0.86; p-value = 0.0004) less likely to be readmitted at 365 days than TKA without PSI patients. Hospitals and health care professionals can use retrospective real-world data to make informed decisions on using PSI to reduce hospital cost and readmission rate, and improve outcomes in TKA patients.